Aasra Fincorp Private Limited Vs ITO (ITAT Allahabad)
Facts- The assessee is engaged in the business of Micro Finance. The assessee e-filed its ROI on 29th September, 2016, in form ITR-6 declaring taxable income of Rs. 74,380/-. The case of the assessee was selected for framing scrutiny assessment u/s 143(3) read with Section 143(2) of the 1961 Act, under CASS. The AO made additions to the returned income in the hands of the assessee, under Section 68 of the 1961 Act, to the tune of Rs. 75,00,000/- towards the share capital introduced during the year under consideration , as the assessee company failed to prove the creditworthiness of the persons who have contributed the fresh share capital allotted by the company during the year under consideration, vide assessment order dated 23.12.2018 passed by the AO u/s 143(3) of the 1961 Act .
Aggrieved by assessment order dated 23.12.2018 passed by AO u/s 143(3) of the 1961 Act , the assessee filed first appeal before the ld. CIT(A), who was pleased to uphold the additions to the tune of Rs. 20,00,000/- being share capital received from Shri Sanjeev Kumar of Rs. 10,00,000/- and also with respect to share capital received from Shri Vinod Kumar Sharma of Rs. 10,00,000/-.
Still aggrieved by the appellate order dated 02.12.2019 passed by ld. CIT(A), the assessee has filed an second appeal before the tribunal.
Conclusion- We are of the considered view that Section 68 of the Act creates a legal fiction which cast obligation on the assessee to explain to the satisfaction of the AO about nature and source of credit in case any amount is found credited in the books of the assessee maintained for any previous year. This creates a legal fiction and in case the assessee did not offer explanation to the satisfaction of the AO as to the nature and source of credit of any amount found credited in the books of the assessee for any previous year by cumulatively satisfying the AO about the identity and creditworthiness of the creditor and about the genuineness of the transaction, the amount found credited in the books of the assessee shall be treated to be the income of the assessee as unexplained income under legal fiction created by Section 68 of the Act.
The Section 68 of the Act created a legal fiction which does not require that the Revenue has to show the sources of the income before bringing the amount to tax since the amount is found to be credited in the books of the assessee in case the assessee has not offered explanation to the satisfaction of the AO. Thus, section 68 of the Act cast obligation on the assessee where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source of credit thereof or the explanation offered by the assessee is found not satisfactory in the opinion of the AO, the sum so credited may be treated as income and charged to income-tax as income of the assessee of that previous year. The burden/onus is cast on the assessee and the assessee is required to explain to the satisfaction of the AO cumulatively about the identity and capacity/creditworthiness of the creditors along with the genuineness of the transaction to the satisfaction of the AO. All the constituents are required to be cumulatively satisfied.
If one or more of them is absent, then the AO can make the additions u/s. 68 of the Act as an income.
FULL TEXT OF THE ORDER OF ITAT BANGALORE
This appeal, filed by the assessee, being ITA No.28/Alld./2020, is directed against an appellate order dated 02.12.2019 in Appeal No. CIT(A), Allahabad/ 10183 /2018-19 passed by learned Commissioner of Income Tax (Appeals), Allahabad (hereinafter called “the CIT(A)”), for assessment year(ay):2016-17, the appellate proceedings had arisen before learned CIT(A) from assessment order dated 23rd December, 2018 (Order No. ITBA/AST/S/143(3)/2018-19/ 1014522692(1) passed by learned Assessing Officer (hereinafter called “the AO”) under Section 143(3) of the Income-tax Act,1961(hereinafter called “ the Act”) . The name of the company was changed from Sutluj Finlease Private Limited to Aasra Fincorp Private Limited, with effect from 25th April, 2019 , vide fresh certificate of incorporation pursuant to change of name, issued by Registrar of Companies, Ministry of Corporate Affairs, Government of India , Office of Registrar of Companies, Kanpur, Uttar Pradesh. The fresh certificate of incorporation issued by ROC, Kanpur , is placed on record in file.
2. The grounds of appeal raised by the assessee in its appeal in ITA No. 28/Alld./2020 for assessment year 2016-17, in memo of appeal filed with Income-Tax Appellate Tribunal, Allahabad Bench, Allahabad(hereinafter called “ the tribunal”) , reads as under:-
“ 1.That in any view of the matter addition as per the assessment order dated Dec 02, 2019 , the assessing officer by determining income of Rs. 20,00,000/- maintained in this respect of investment made by shareholder by ld. CIT(A) is totally incorrect and illegal.
2. That in any view of the matter investment of Rs. 10,00,000/- by Sanjeev Kumar who is one of the shareholder of the company and investment made through bank channel as well cash, assessed to tax, confirmation filled. In this way the appellant discharged the complete burden, hence addition made by assessing officer and confirmed by CIT(A) is uncalled for.
3. That in any view of the matter investment of Rs. 10,00,000/- by Vinod Kumar Sharma who is one of the shareholder of the company and investment made through bank channel as well as cash, assessed to tax, confirmation filled. In this way the appellant discharged the complete burden, hence addition made by the assessing officer and confirmed by CIT(A) is uncalled for.
4. That in any view of the matter findings and observation of Commissioner of Income Tax(Appeal) by way of addition of Rs. 10,00,000.00 each are incorrect and contrary to the factual of the case whereas the appellant discharged the burden while filing the paper, therefore the action of Commissioner of Income Tax (Appeal) in maintaining the addition is not correct.”
3. This appeal is fixed for hearing before the Division Bench of Allahabad-tribunal on 11.05.2022. When this appeal was called for hearing on 11th May, 2022, none appeared on behalf of the assessee, however, an application dated 10.05.2022 was filed by the assessee Director , CA Shri Ashok Singh before the Registry of the tribunal , in which it is stated that the assessee counsel is not keeping well due to fever and cold , and request was made for adjournment of the hearing, although no evidence of the illness of the counsel of the assessee was enclosed. It is also observed that the same Director of the assessee Company namely CA Shri Ashok Singh had filed an adjournment application dated 17th December, 2021 verbatim on the same ground that the counsel of the assessee is not keeping well due to fever and cold, and when the case came up for hearing before the Division Bench on 21st December, 2021 , the Bench was pleased to grant adjournment to 11th January, 2022 with the direction that this is the last opportunity granted by the Bench to the assessee. It is also observed that the same Director of the assessee Company namely CA Shri Ashok Singh had filed an adjournment application dated 13th December, 2021 verbatim on the same ground that the counsel of the assessee is not keeping well due to fever and cold, and when the case came up for hearing before the Division Bench on 14th December, 2021, the Bench was pleased to grant adjournment to 21st December, 2021. It is observed that similar letter dated 18.10.2021 verbatim was filed by the same Director, CA Shri Ashok Singh requesting for adjournment of hearing before the Division Bench on 20th October, 2021, on the ground that the counsel of the assessee is not keeping well due to fever and cold , and When the case came up for hearing before Division Bench on 20th October, 2021, the Bench was pleased to grant adjournment to 15th November 2021. It is observed that similar letter dated 28.09.2021 verbatim was filed by the same Director , CA Shri Ashok Singh requesting for adjournment of hearing before the Division Bench on 29th September, 2021, on the ground that the counsel of the assessee is not keeping well due to fever and cold and when the case came up for hearing before Division Bench on 29th September, 2021, the Bench was pleased to grant adjournment to 20th October, 2021. The assessee has also sought several other adjournments whenever this appeal came for hearing before the Division Bench , on one pretext or other . The assessee sought adjournments on 24.02.2021, 16.03.2021 , 15.04.2021, 29.09.2021, 20.10.2021, 14.12.2021 , 21.12.2021 and 11.05.2022. The adjournment applications are placed on record in file. The assessee did not appear for hearing on 20.01.2021, 31.08.2021 and 15.03.2022, when this appeal was called for hearing nor any application for adjournment was filed by the assessee. The Bench was pleased to grant adjournment on all the earlier occasions, while on 15th March, 2022 , the Division Bench granted Last Opportunity to the assessee. On 11.05.2022 when this appeal was called for hearing , the Division Bench rejected the adjournment application filed by the assessee and the appeal was heard ex-parte in the absence of the assessee, and after hearing ld. Sr. DR. Thus, it could be seen that on all of the earlier occasions when this appeal came up for hearing before the Division Bench, either the assessee chose not to appear before the Bench nor any adjournment application was filed , or otherwise the assessee merely filed adjournment application verbatim with similar reasons that the counsel for the assessee is not well due to fever and cold, which clearly shows that the assessee is not interested in pursuing its appeal. So thus on 11.05.2022, the Division Bench rejected the adjournment application filed by the assessee by passing interim order rejecting the adjournment application filed by the assessee, and the Division Bench proceeded to decide this appeal ex-parte in the absence of the assessee after hearing Ld. Sr. DR , and perusing the material available on record. The order sheet entry/ interim order passed by the Division Bench dated 11th May, 2022 , is reproduced as hereunder:
“Dated: 11.5.2022
ITA No. 28/ALLD/2020
Assessment Year: 2016-17
None appeared on behalf of the assessee when this appeal was called for hearing. An application on behalf of the assessee is filed for seeking adjournments of the hearing on the ground that the counsel of the assessee is not keeping well. At the outset, we note that the assessee has been seeking adjournments of the hearings since beginning.
During the Covid period, the hearings of the appeals were conducted through video conference and no adjournments were denied by the Bench.
Even after the physical hearing started the assessee has not shown interest in prosecuting the present appeal despite several opportunities granted by the Bench. Accordingly, we decline to adjourn the hearing and propose to hear and dispose of the appeal ex parte.
Sd/-
(RAMIT KOCHAR)
ACCOUNTANT MEMBER
Sd/-
(VIJAY PAL RAO)
JUDICIAL MEMBER “
This appeal was heard on 11.05.2022 by Division Bench of Allahabad-tribunal, in open Court hearings through Physical Hearing Mode.
4. The brief facts of the case are that the assessee is engaged in the business of Micro Finance. The assessee e-filed its return of income on 29th September, 2016, in form ITR-6 declaring taxable income of Rs. 74,380/-. The case of the assessee was selected for framing scrutiny assessment u/s 143(3) read with Section 143(2) of the 1961 Act, under CASS. The AO made additions to the returned income in the hands of the assessee, under Section 68 of the 1961 Act, to the tune of Rs. 75,00,000/- towards the share capital introduced during the year under consideration , as the assessee company failed to prove the creditworthiness of the persons who have contributed the fresh share capital allotted by the company during the year under consideration, vide assessment order dated 23.12.2018 passed by the AO u/s 143(3) of the 1961 Act .
5. Aggrieved by assessment order dated 23.12.2018 passed by AO u/s 143(3) of the 1961 Act ,the assessee filed first appeal before the ld. CIT(A), who was pleased to uphold the additions to the tune of Rs. 20,00,000/- being share capital received from Shri Sanjeev Kumar of Rs. 10,00,000/- and also with respect to share capital received from Shri Vinod Kumar Sharma of Rs. 10,00,000/-. The Ld. CIT(A) granted relief to the assessee to the tune of Rs. 55,00,000/- with respect to share capital received from M/s. Stance Synergies Private Limited to the tune of Rs. 25,00,000/- , and share capital received from Shri Ashok Kumar Singh to the tune of Rs. 30,00,000/-. The Ld. CIT(A) while adjudicating the appeal held as under, vide appellate order dated 02.12.2019:
“Decision :
I have gone through the facts and written submissions filed along with the details enclose therein. Appellant is in the business of micro finance. During the year Share capital was increased by converting existing loan amount taken for business purposes into share capital. During the assessment proceedings appellant has submitted before the AO, all the loan conversion agreements executed on 25th day of March, 2016 signed by Sri Sanjeev Kumar s/o Sunil Kumar, Sri Ashok Kumar s/o Ram Chandra & Vinod Kumar Sharma s/o Nanhe Lal Sharma: copies of audited balance sheet and Profit & loss , bank statement of M/s Sutluj Finelease Pvt. Co. with corporation Bank a/c no. CBCA/01/000844 & copy of ITRs of all the shareholders.
AO directed the appellant to establish the identity of the subscribers to the share and their creditworthiness and genuineness of the transaction in case of fresh capital. Appellant proved the identity and genuineness of these investment by filing the desired documentary evidence like Aadhar Card, ITRs , bank statement and loan conversion agreement. AO made the addition of Rs. 75,00,000/- as appellant failed to prove the creditworthiness of these persons as required u/s 68. Appellant was again asked during the appellant proceedings to submit all the documentary evidence to prove creditworthiness of the lenders in respect of share capital introduced. Appellant submitted following documentary evidence in support of the same that is being discussed as below:
